Payday Lending in Minnesota

Human Impact Partners, working closely with ISAIAH—a faith-based coalition of more than 100 congregations—conducted an HIA to assess the potential health effects of a legislative proposal to cap annual percentage rates (APR) on payday loans and increase reporting requirements. The bill is expected to be introduced in the Minnesota Legislature in 2016. The HIA considered the regulatory provisions’ impact on individual financial and mental health status and family capacity to secure health-related resources and cope with stress. The average payday loan amount in Minnesota is $390, and borrowers earn an average of $30,000 a year. Given the cost of living and average APRs in the state, more than 8 in 10 borrowers are unable to repay on time.

The HIA found that payday lending storefronts are most likely to be located in communities with higher proportions of people of color, people with lower incomes, immigrants, and renters. Census tract analysis found that African-Americans are twice as likely to live within 2.5 miles of a payday lending storefront compared with all Minnesotans. The HIA also found that the majority of Minnesota counties with payday lending storefront operations rank in the bottom half of the state for health outcomes such as premature death and self-rated health.

The HIA recommended that the Minnesota Legislature cap interest rates and limit the number of times a loan can be rolled over. It also suggested that financial institutions such as banks, credit unions, and community-based providers invest in innovative ways to meet the need for affordable small-dollar loans, financial planning, savings, and credit-building services.

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